1. From an Underwriter’s perspective

2.  Financial Underwriting Involves the developments and Interpretation of financial information  It attempts to analyze the motivation behind the purchase of insurance and the ability to continue to pay renewal premiums

3.  Businesses can afford to pay higher premiums  Life insurance premiums are often a deductible business expense

4.  According to the National Institute on Mental Health, suicide was the 10 th leading cause of death in 2007  According to the High Face Amount Mortality Study, published by the Society of Actuaries in April of 2012, suicide represented 40% of the non-medical causes of death for term insurance and the third leading cause of death

5. Cause of Death Product Type TermWhole LifeULVUL/ EILOtherTotal Cancer4763634632001331635 Cardiovascular21624032411665961 Respiratory3271121377268 Mental & Nervous244968216168 Stroke2246611612157 Digestive915238964 Infectious68206848 Genitourinary515142137 Childbirth131822 Diabetes & Metabolic2747 20 Blood & Immune3233112 Motor Vehicle Accidents7416251112138 Other Accidents13151435723305 Suicide16618293522270 Homicide33367251 Other6211552161246 Total1262101912595423204402

6.  Book Value – Total assets minus total liabilities  Capitalization of earning – future earnings ÷ capitalization rate  Discounted Cash Flow – present value of a company’s future cash flow  Terminal Value – present value at a future point in time of all future cash flows when we expect stable growth rate forever

7.  Discount Rate – represents the total expected rate of return that an investor would likely require from a potential investment. The discount rate is directly related to the level of risk inherent in the investment  The Capitalization Rate – more often used in valuations where the cash flows are stable or in situations where the future cash flows are not available. It’s derived by subtracting the growth rate from the discount rate.

8. The probable price at which a willing buyer will buy from a willing seller when: 1.) both are unrelated 2.) both parties know the relevant facts 3.) neither party is under any compulsion to buy or sell

9.  Asset  Market  Income

10.  Restating the balance sheet using the fair market value of assets and subtracting the fair market value of the liabilities

11. Entails direct comparison of the company being valued to similar companies. Comparisons to publicly traded companies or use actual sales transaction for similar businesses Results are often expressed in ratios – Price-to-earnings ratio – Price-to-revenue ratios – Price-to-EBIDTA

12.  Focuses on the analysis of the future economic benefits of an entity.  Capitalization of earnings  IBDT÷ Cap rate

13.  Annual of earnings = $100,000  Capitalization Rate = 25%  Growth rate = 0  Valuation = $100,000 ÷ 25% = $400,000

14.  Annual of earnings = $100,000  Capitalization Rate = 25%  Growth rate = 5%  Valuation = $100,000 ÷ (25% - 5%) = $500,000

15.  Annual of earnings = $100,000  Capitalization Rate = 20%  Growth rate = 10%  Valuation = $100,000 ÷ (20% - 10%) = $1,000,000

16.  DCF = CF 1 /(1+r) 1 + CF 2 /(1+r) 2 + CF 3 /(1+r) 3...+ CF n /(1+r) n + PV of terminal value Where: CF 1 = cash flow in period 1 CF 2 = cash flow in period 2 CF 3 = cash flow in period 3 CF n = cash flow in period n r = discount rate (also referred to as the required rate of return)

17.  Price = I ÷ (R-g)  Where  I = the annual cash flow at the end of the discrete period  R = Discount rate  g = growth rate

18.  Cover  Valuation Summary (including assumptions and limiting conditions)  Valuation Assignment  Economic outlook  Industry outlook  Business overview  Conclusion

23. QUESTIONS?